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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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June 4, 2009

CafePharma Will Now Approach The Bench

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Posted by Derek

Here's an interesting situation for you: according to IguanaBio, a shareholder lawsuit over the failed Vytorin ENHANCE clinical trial (that's caused Schering-Plough and Merck so much grief) is going to use posts on CafePharma as evidence.

That will be worth watching. CafePharma's message boards have been described (accurately, I'd say) as often being the electronic equivalent of a bathroom wall. There's good information in there, but the signal/noise ratio is abysmal due to the number of ticked-off people who go there to vent. There do appear to have been some posts suggesting strongly that the ENHANCE data were grim, and who knows? They could have been speaking from real knowledge. But there's no way to be sure - and for every post that turns out to be prophetic, there are ten that are totally wrong.

So I'm surprised that these are going to be considered admissable. Anyone investing on the basis of CafePharma board chatter deserves to lose their money - which will go out in brokerage commission fees, if nothing else. Let's see how this plays in court. . .

Comments (11) + TrackBacks (0) | Category: Business and Markets | Cardiovascular Disease | Clinical Trials | Drug Industry History


1. dWj on June 4, 2009 1:48 PM writes...

Does the average judge know what "hindsight bias" is?

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2. CMCguy on June 4, 2009 2:17 PM writes...

I have no idea of legal definition/impact but would suggest blog posting would be "hearsay" type evidence (which on TV Shows at least is of lesser value).

Conversely isn't CafePharma mostly Marketing types so might be some validity? Based on my connections with those people/groups they do tend to get "inside scoops" about a company especially relative to the R&D people who seem to be the near last to learn news (QA being last). Most places R&D is analogous to "Growing Mushrooms" about anything outside their direct area.

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3. Nathan on June 4, 2009 9:13 PM writes...

This was little more than just venting. The CafePharma posts were far too detailed to just be "hindsight bias". Judge for yourself (link below). The CafePharma posts actually discussed changing the primary endpoint of the ENHANCE trial -- which, as you'll recall, is exactly what happened. Moreover, a CafePharma poster even mentioned increased liver tox as compared to Zocor -- which,again, is exactly what was observed. Somebody was spilling the beans here. There's no doubt about it.

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4. HelicalZz on June 5, 2009 7:44 AM writes...

All my sympathy goes to the jury whose member will likely have to sit still for hours while listening to lawyers read message board posts to them.


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5. Anonymous BMS Researcher on June 5, 2009 5:19 PM writes...

I look at CafePharma occasionally, and I would agree with Derek's description of it as resembling a bathroom wall. Certainly the postings from BMS folk appear to run heavily to very disgruntled sales people who have extremely negative opinions of our management. I would say the signal-to-noise ratio over there is many decibels worse than it is over here, which is why I spend a lot more time reading the Pipeline blog than I spend on cafepharma.

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6. The Condor on June 6, 2009 8:06 AM writes...

Derek -- I agree that much of CafePharma content is simply gossip, rumor and innuendo.

That said, Judge Cavanaugh has simply ruled that Schering cannot -- as a matter of law -- KEEP these items from the jury. It is up to the jury to decide the reliability of these posts, and on that score, Schering will be allowed to add some 75 pages of the "scrawls on a public mens' room wall" material, to suggest the noise to signal ratio.

I think, though, the plaintiffs' lawyers are ALSO making a little bit more subtle argument -- with these CafePharma posts. As I understand it, it runs along these lines: without regard to whether the anonymous CafePharma poster(s) had ACTUAL information in the Spring of 2007, on ENHANCE, it is all but admitted that senior executives of Schering-Plough were "monitoring" that CafePharma board at that time. So, it is urged, Schering executives clearly knew that SOMEONE was saying "ENHANCE is a bust". [In this regard, remember, the suit includes sworn statements from six so-called "CWs" -- confidential, unnamed witnesses, all ex-Schering-Plough employees, as well.]

Then -- within days -- Carrie Cox exercised and sold 11 times her annual salary worth of stock at around $29 per share -- grossing $29 million; NETTING over $11 million.

Whether the poster had ACTUAL information, or not, the plaintiffs are alleging that Carrie Cox may very well have been aware of the CafePharma posts, and at a minimum should have done more than simply phone Susan Ellen Wolf (the SEC compliance lawyer at Schering), to clear her trades. Ms. Wolf has publicly told the SEC she pre-cleared Ms. Cox's trading.

She (Susan Ellen Wolf), the plaintiffs would say, should have asked many, MANY more questions, and received assurances that she (Carrie Cox) did not actually possess, and would not have the ENHANCE info -- whatever it was -- "attributed" to her, at the time of the stock trade, for insider trading rule purposes. She was/is the fourth highest officer in the company, afterall -- so (as de facto head of pharma marketing) she should have known "all there was to know" about Vytorin's future prospects, at the time, right?

Why would Ms. Wolf have this heightened duty? Because, the plaintiffs will urge, CafePharma amounted to "unsual and persistent market rumors" that something was amiss. That, in turn, created additional duties of diligence -- atributable to both Cox and Wolf.

That's my take -- much more on it, over at my joint -- click my name, then search "CafePharma" in the search box.


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7. Me on June 7, 2009 7:40 PM writes...

Has anyone once considered the possibility that networking sites like CafePharma contain more truth than fiction?

"Disgruntled" is an ad hominem attack, and as in all ad hominem attacks, do not automatically invalidate their arguments.

Also, just because foul language appears, that also does not invalidate what is written.

It seems to me that the polite puffery that comes from the comanies themselves is at least as suspect as anything on the "gossip" sites.

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8. Condor on June 8, 2009 12:07 PM writes...

Hey "Me" -- I certainly have "considered" that "possibility".

I don't know that CafePharma contains "more truth" than fiction, but I do know that evidence often appears in the most unlikely of places. Admissible evidence is found everyday in even the seediest bars (and bar restrooms).

And that is what has happened here -- in my opinion.

Finally -- I would say that the puffery from SGP is often not even all that polite -- and yes, it is mostly suspect. I agree.


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